Li Keqiang Visits Berlin Amid Trade Tensions

On his first foreign tour as Chinese Premier, Li Keqiang is in Berlin today, where he met with German Chancellor Angela Merkel. Germany, China’s largest European trading partner, will be the premier’s only stop in an EU member nation on a tour that began in India last week. Deutsche Welle reports on the growing trade links between China and Germany, and on agreements signed in Berlin:

Trade between Germany and China reached around 144 billion euros ($185.7 billion) in 2012, according to official German data.

German motor vehicles and auto parts, machinery and electrical goods have a vast export market in China, the world’s second-largest economy. China, on the other hand, utilizes technology from Germany. More than half of its solar panel output is exported to Europe.

During their encounter, Chinese and German representatives signed 17 declarations and agreements on bilateral trade projects and German-Chinese cultural ties. China’s Confusius Institute, which offers language courses, is to work closer with Germany’s 16 regional states or Länder. [Source]

Li’s Berlin visit follows his criticism of intended EU probes and tariffs against Chinese solar and telecoms equipment. While in Switzerland yesterday, Li signed a free trade agreement that he lauded as a “powerful message to the rest of the world” against what he sees as a European trend towards protectionism. In a joint statement from Berlin today, Li and Merkel both affirmed a commitment to free trade. From Reuters:

German Chancellor Angela Merkel and Chinese Premier Li Keqiang on Sunday called for an end to a trade row between Europe and China over solar panels and wireless equipment, telling a joint news conference they were both for free trade.

[...]Merkel said Germany would do everything it could to prevent the trade dispute from escalating to the point where the European Commission imposed import duties on Chinese panel makers.

[...]Li, standing next to Merkel at the briefing that followed the signing of a range of business agreements, said a trade dispute between the EU and China would harm both sides and benefit neither. [Source]

Bloomberg outlines the heightening trade tensions between China and the EU:

The European Commission, the EU’s regulatory arm, expects to introduce levies on solar products by June 6 to punish Chinese manufacturers for selling in the 27-nation EU below cost, a practice known as dumping. The duties will be the preliminary outcome of an inquiry that is due to end in early December, by which time EU governments must decide whether to impose “definitive” anti-dumping duties for five years.

The Alliance for Affordable Solar Energy, a Brussels-based lobby group, had urged Merkel to defuse the looming trade conflict and “actively push” for a mutual solution as tariffs would only hurt jobs and undermine solar energy growth. The Obama administration has also engaged in preliminary talks with the EU and China to settle the solar dispute, according to people familiar with the discussions.

The EU is poised to penalize imports of Chinese solar products after Solarworld AG (SWV), Germany’s biggest panel maker, lodged an anti-dumping complaint with the commission. Import tariffs would hurt manufacturers such as China’s Trina Solar Ltd. (TSL) and raise costs to build power plants in Europe, the world’s largest market for solar products and one largely supplied by Chinese manufacturers. [Source]

Amid this tense trade environment, AFP reports on the “special relationship” that may have prompted Li to choose Germany as his only EU stop, and on the two country’s interests in quickly resolving tensions:

Germany is the only stop among the EU’s 27 member states for Li on the trip, in a sign that Beijing wants to continue their special relationship, analysts say.

“From the German side, it’s all about trade. Germany sees China essentially as a large export market on which it’s increasingly dependent,” Germany expert Hans Kundnani, of the European Council on Foreign Relations, told AFP.

Merkel made two trips to Beijing within just seven months last year and said Sunday the two sides wanted to further bolster their already “close” relations, citing four areas — industry, IT, urbanisation and agriculture.

But for China, Germany is not only economically important in providing much-needed technology but also plays a strategic part in helping to combat Beijing’s fear of the US and Europe teaming up against it, Kundnani said.

[...]EU exports to China totalled $212 billion, with imports of $334 billion in 2012. [Source]

Also see prior CDT coverage of trade disputes, and of China’s relationship with Germany and the EU.